China's military has experienced considerable advancements since the 1970s when it was designated as the last of the so-called four modernisations (agriculture, industry, science and technology and the military) that were to command the attention of the nation as it developed and opened up to the world. The PLA remains the world's largest military. Defence spending is growing faster than any other segment of China's budget and has risen every year since 1988. While the size of the defence budget remains shrouded in secrecy, the US Department of Defense recently estimated that China is spending about five per cent of GDP on defence and that total military funding levels are expected to average over US$40 billion, in constant 1994 dollars, annually over the next ten years.
The ability to put more resources into the military clearly has been made possible by the country's overall high GDP growth rates that have averaged approximately 9.5 per cent between 1979 and 1996 and have placed China among the world's fastest-growing economies. Based on projected growth levels of eight per cent between 1996 and 2000, and 7.2 per cent between 2001 and 2010, sustained military increases are highly likely for at least the next 10 to 12 years.
The Chinese have used the decade of the 1980s and the period of the early to mid-1990s to reorientate the PLA away from its early doctrine of Mao Zedong's People's War that emphasized guerrilla warfare strategies and tactics and defence of the homeland against a strategic invader, to a more outward-looking strategy and doctrine that continues to evolve today. The PLA was strongly influenced by US and coalition performance in the 1991 Gulf war and is attempting to implement key lessons learned from that conflict. In particular it sees the need to field a truly modern high-tech force and one that is capable of exploiting the revolution in military affairs (RMA). Chinese strategists speak frequently of an active defence doctrine that emphasizes offensive operations, pre-emption, engaging the enemy at or over the border, the military uses of space, and information warfare. This strategic re-orientation will have a major impact on the future Asia-Pacific security environment as China gradually accumulates the tools and capabilities to project power farther into the region and adjoining seas.

In the early years, China's arms industry relied mainly on assistance from the former Soviet Union. Following the split between the two communist giants in the early 1960s, China slowly developed some self-sufficiency in arms production, including the ability to copy and produce certain Soviet weapons systems. Presently the trend is towards greater self- sufficiency, including such high-tech areas as ballistic and cruise missiles as well as selected off-the-shelf purchases of modern weapons systems and components from major producers such as Russia, Israel, France and the UK. Given their self-sufficiency in certain areas, the Chinese increasingly are able to export a range of systems, including offensive missiles. However, there is persistent corruption in the system and a lack of control over weapons exports, and missiles and other arms often are supplied to Iran and other rogue regimes. Evidence has begun to emerge during the past few years that the PLA is involved in myriad business dealings that include many non-military enterprises, and that this so-called PLA Inc phenomenon adds billions of dollars to the military's coffers for weapons purchases, troop support, pay-offs or other types of spending.
Some examples of recent high-profile foreign technology acquisitions from Russia include 50 Su-27 fighter aircraft with a licence to co produce an additional 200 in the future; four KILO-class diesel submarines (including two of an advanced design), and two SOVREMENNYY class destroyers, each equipped with SS-N-22 Sunburn supersonic anti-ship cruise missiles.

The evidence is clear that the People's Liberation Army Inc is a massive enterprise through out China and a significant factor in the Chinese economy. For some time US and other foreign-intelligence organisations have been trying to determine the exact size and description of the Chinese commercial arms industry but no agreed answers to its full scope seem to exist. In 1995 the US Defense Intelligence Agency (DIA) prepared a detailed chart of China's defence-industrial trading organisations but even this shows only selected corporations or their products and services. This peculiarly Chinese phenomenon appears so pervasive it is likely to continue for some time.

Short of a high-level policy decision in China to terminate the PLA's commercial activities there would seem to be no likelihood of its curtailment. A clue to the apparent protected status of PLA Inc is the presence in high management positions of these companies of princelings of the ruling elite, the children and relatives of senior Chinese communist officials. These company heads have the important connections that will protect their operations from any effort to terminate them. For example, China Poly Technologies that ranks as the fifty-ninth largest export-import company in China, is headed by Wang Jun as chairman and He Ping as vice chairman. Wang Jun is the eldest son of the late vice president Wang Zhen and He Ping is the son-in-law of the late paramount leader Deng Xiaoping. It is easy to see why foreign companies looking for entry into the Chinese economy see these protected PLA companies as their best hope for long-term connections.
The 1995 DIA report warned that the PLA profit-orientated organisations provide foreign exchange for the Chinese defence-industrial complex and give China access to advanced technologies that can be used to improve future weapons systems. But this kind of warning seems to be ignored by US and western companies seeking profitable business enterprises in China. The US government and US business community for example, have not agreed on what constitutes a strategic threat. But even if American businessmen were to agree to stop dealing with PLA companies, the Chinese arms industry probably would continue on its present course. There are many other customers around the world.